The allure of the U.S. stock and private markets is undeniable. With its vast array of high-growth companies, technological innovation, and global market leadership, it’s no wonder that global investors are increasingly turning their attention to Wall Street. If you’re considering diversifying your portfolio by investing in the U.S., here’s a quick guide tailored for Australian investors. 

Why Invest in U.S. Stock and Private Markets?

 

Access to Global Market Leaders

U.S. is home to some of the world’s most influential companies, including Apple, Microsoft, Amazon, and Google. Investing in these firms allows Australians to tap into industries like technology, healthcare, and consumer goods that may be underrepresented on the ASX.​ 

Diversification Benefits

The Australian stock market constitutes only about 2% of the global equities market. By investing in the U.S. markets, Australians can achieve better diversification, potentially reducing portfolio risk and enhancing returns.  

 More Attractive Investment Opportunities

U.S. provides some of the most sophisticated and matured investment opportunities other than stocks and bonds. For instance, private equity funds allow investors to tap into venture capital and growth equity opportunities. And private debt instruments expand investment options even further by allowing diversification into private lending funds that are secured by hard assets such as commercial and residential properties in the U.S. 

 Strong Historical Performance

Over recent years, U.S. indices like the S&P 500 have outperformed the ASX 200. For instance, in 2024, the S&P 500 delivered a 22% return compared to the ASX’s 11%. 

How to Invest in U.S. from Australia ?

 

Understand the Tax Implications

As an Australian resident, you’ll be subject to both U.S. and Australian taxes on your investments:  

• U.S. Withholding Tax: Due to the U.S. Australia tax treaty, U.S. imposes a reduced 10%-15% withholding tax on interests and dividends paid to non-resident Australian investors.​  

• Australian Tax: Australia taxes worldwide income, including dividends and capital gains. However, the Australia-U.S. tax treaty allows you to claim a foreign income tax offset for the U.S. withholding tax paid, reducing the risk of double taxation.  

• U.S. Tax Filing Requirement: You may or may not have a U.S. tax filing requirement depending on your investment vehicles in the U.S. We help our Australian clients to invest selectively in certain vehicles if their goal is to avoid U.S. tax filing requirement. 

• U.S. Estate Tax for Noncitizens and Nonresidents: In general, a noncitizen or nonresident has an exemption amount limited to only $60,000 against the U.S. estate tax for his or her US-situated assets owned at death, compared to $13.99 million lifetime gift/estate tax exemption for a U.S. person. Fortunately, the U.S. Australia tax treaty allows a higher exemption amount for Australians based on their worldwide assets.  

• Australian Corporation Investing in the U.S.: Australian corporations pay a top tax rate of 30% instead of 45% plus a Medicare levy of 2% for individuals. This creates a tax deferral opportunity for Australian investors to defer taxes on their U.S. portfolio by investing through a corporation.

Complete the Necessary Paperwork

To benefit from the reduced U.S. withholding tax, you’ll need to complete a W-8BEN form, certifying your foreign status. Most tax accountants and financial advisors provide guidance on how to fill out this form for your U.S. investment accounts. 

Consider Currency Exchange

Transactions in U.S. investments involve currency conversion between AUD and USD. Be mindful of exchange rates and any associated fees, as they can impact your investment returns.​ 

Work with Financial Advisors who are Familiar with Australian Investors

Morling Financial Advisors has vast experience working with high-net-worth clients in Australia, and we have an extensive professional network of tax accountants and estate attorneys that specialize in international tax and estate matters. 

Conclusion 

Investing in the U.S. offers Australian investors the opportunity to diversify their portfolios and access sophisticated investment options such as private market funds. By selecting the right financial professionals, understanding the tax implications, and carefully considering your investment options, you can effectively navigate the U.S. market. Always conduct thorough research or consult with a financial advisor to ensure that your investment strategy aligns with your financial goals. 

 

Morling Financial Advisors, LLC (“MFA”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about MFA’s investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, which is available upon request.

The opinions expressed are those of MFA. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed. The investment strategy or strategies discussed may not be suitable for all investors. Be sure to consult with a tax professional before implementing any investment strategy.

This should not be construed as tax advice.  You should always consult with your tax professional with regard to specific tax questions and obligations.

Investors must make their own decisions based on their specific investment objectives and financial circumstances.

The information contained herein should not be considered a recommendation to purchase or sell any particular security or sector